The three forms of Peak Oil (let’s hope for the benign form)

This post is a follow-up to The most dangerous form of Peak Oil (8 April 2008), which I strongly recommend reading. Peak oil is a theory in that, like evolution, it is difficult to prove — at least, until after peaking occurs. We can describe three forms of the Peak Oil theory.

I. The “weak” form — This the current consensus in Peak Oil circles (the Assn for Study of Peak Oil 2004 forecast falls in this group) — Global oil production (including unconventional sources) will peak unpredictably at some point in the next 10 – 20 year. Perhaps less, as our limited knowledge about global reserves makes accurate forecasting impossible. Until then oil production will decline in most nations, offset by increased production from Middle East and perhaps the Former Soviet Union (FSU).

II. The “moderate” form — The Saudi’s will prove unable to significantly increase production, although they will maintain current output levels for many decades. Global production will peak in the next 0 – 10 years (perhaps less), probably after a plateau of several years (perhaps more). The decline rate following the plateau will be small (3% – 5%). Matthew Simmons’ evidence strongly supports this view.

III. The “strong” form — The Saudi’s will prove unable to increase their production, which will sharply peak during the next 5 years — with no plateau. The decline in global production that follows peaking will be steep (5% – 8% per year, perhaps more), with catastrophic effect on the global economy. I believe this is Simmons’ view, although he says that there is insufficient public information to do more than guess at the timing and nature of peaking.

A typology like this is an oversimplification, serving to illustrate the key factors and the range of possible scenarios.

Oil prices have increased since 2002 for unknown reasons. My guess is that prices have risen due to the same factors affecting a wide range of commodities: industrial materials, other energy sources (e.g., coal), precious metals, and agricultural products. The most likely drivers are the usual “end of boom” supply shortages plus inflation.

After a long economic boom, inventories often have been drawn down and there is no longer a “cushion” of excess production. Therefore the inevitable supply shocks are rapidly transmitted directly to the end users, driving up prices.

Inflation often appears after periods of vigorous economic growth.

We can learn much about these things by reading the great works of our past. Two quick citations will end this post.

George Eliot speaking about Peak Oil in “Silas Marner”:

The sense of security more frequently springs from habit than from conviction, and for this reason it often subsists after such a change in the conditions as might have been expected to suggest alarm. The lapse of time during which a given event has not happened is, in this logic of habit, constantly alleged as a reason why the event should never happen, even when the lapse of time is precisely the added condition which makes the event imminent.

Was John Maynard Keynes thinking about Peak Oil when he wrote this?

By `uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty … The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence … About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.“The General Theory of Employment”, The Quarterly Journal of Economics, (February 1937)

We know so little about our use of energy. About our reserves of coal, petroleum, and other minerals. About the relationship of energy prices and supplies to economic growth.

Worse, I have shown in previous articles, we appear to have little interest in doing the research that can provide a foundation on which to plan for peak oil. So many of our oil experts prefer inspired guessing (Hirsch is one of the exceptions), and our government has so many other things on which to spend money — rather than the pittance which could yield so many valuable insights about our use of energy.

13 thoughts on “The three forms of Peak Oil (let’s hope for the benign form)”

We’ve already seen the Saudi’s say they are putting new developments on hold for future generations, and once they get production up to 12.5 million barrels a day they will stop and reevaluate what do do next.

That surely cannot bode well for the oil markets. It’ll be great, supply wise, for turning the peak into a plateau. But for prices… they’ll keep going up, further prolonging the plateau. High prices also would mean more supply source become economically (barring some sort of carbon tax of course) viable. I’m thinking tar sands and oil shale. That will add high cost oil into the market too. Not even mentioning the latest giant oil fields off the coast of Brazil that have been discovered.

I guess I’m in the camp now that thinks we don’t have to worry about running out of oil, we have to worry about running out of low cost oil.
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.Fabius Maximus: I suspect your optimism is misplaced.

1. It is not just about cost, that at some price we will have all the liquid fuel we need. Unconventional sources tend to be inherently low flow compared to the conventional supergiant fields now peaking. With massive effort, bitumen mining in Canada (aka oil sands) might produce 5 million barrels/day by 2020. If nobody cares about Alberta’s environment, and they have sufficient water and natural gas (or alternative energy sources, such as nukes).
.2. The technology to produce commercial flows from kerogen mining (aka oil shale) is not yet proven. It is likely possible, but might take decades to perfect and build out on a large scale.
.3. Please read my series about the Bakken Formation. The new “giant” fields off Brazil are rumors. Many fields “discovered” with one or two wells never played out. Even if true, this oil lies under 2 – 3 kilometers of water — and roughly 3 kilometers of salt and another kilometer of rock. This is on the outer edge of current technology. It will take years to verify the find, drill, and install production equipment.

Evolution was proved. Only religious fundamentalists don’t undertand it because they want live at the Dark Ages. mankind evolved from apes. Adam and Eve is a faerytale.
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.Fabius Maximus replies: I disagree; this is a “Sunday Science” section version of the problem.
.There is a large body of evidence that “evolution” is correct, but “proof” is difficult for many theories in the physical sciences. The “big bang” theory is another. That does not mean that they are wrong, but rather that the physical sciences face something like Godel’s “incompleteness theorem” — some theories are correct but cannot be formally proved.

Yes, but other theories in the physical sciences are that “Earth Moves Around the Sun” and the “Earth is Round”. They have so much “proofs” for that as exist for Evolution and Big Bang and both are “incompleteness theorems” too. Everything at Science is “incompleteness theorems” because is that the way as Science works. and Science is working very well with that, look at the modern world and the marvelous thecnologies you use at battle fields.

But you will not write “Peak oil is a theory in that, like Earth Moves Around the Sun, it is difficult to prove”, because that will show how ridiculous is your opinion about Evolution. By the way, there are a lot of proofs that there are Evolution, like fossils, intermediate forms, genetic data, etc, but can you say what are the proofs that Earth moves around the Sun? By the way, there are some cristian fundamentalists that say that Earth don’t moves…

The bible say {snip}

However, the cristian fundamentalist just don’t accept it and want live at an alternative reality, without Science. IMHO, they are more dangerous than the islamic fundamentalists, because they have a strong influence at the US governement. And I am sorry to say, you that analyse 4th GW everyday, that follow that fundamentalistic vision is a path that will be only one result: defeat.

The apex of Science is the Theory. There is nothing above it at Science. Evolution is at that apex. There are a huge number of evidence that there is Evolutiona and that the species that exist at our world evolved. Evidence worked by the last 150 years. For the “alternative” that is creationism, at its diferent forms, including “inteligent design”, there is no proof, no evidence, no scientific work, only propaganda paid by the fundamentalists.

You can not live and win wars at the modern world without Science. But that fundamentalists want live without Science. Sorry to say it, but the “American Fundamentalism” is not only a symptom of US decline, but a cause.

A country of scientific illeterate cannot win wars.
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.Fabius Maximus replies: I disagree with almost all of this. Your comments about religion are been snipped, as the topic of this site is geopolitics.
.1. Both the “Earth moves around the sun” and “Earth is round” have physical verification, esp. since we have traveled into space. Similar verification of evolution requires time travel.
.2. Gödel’s “incompleteness theorem” does not mean, as you imply, that nothing can be proved. Rather, there are true statements in any mathematical system for which there are not formal proofs.
.3. I do not see any basis to say “Evolution is at that apex” of science. More reasonable candidates imo are general relativity, the great conservation laws, or even Descartes insight about the relationship of cause and effect.
.4. “there are a lot of proofs that there are Evolution” — The examples you give are evidence, not proofs. As I said above, there is a large body of evidence supporting the theory of evolution (which is a complex and subtle theory, imo one of the more impressive achievements in the brief history of science.).
.5. “For the ‘alternative’ that is creationism” — You imply that this is the only alternative. This is the logical fallacy of the false dilemma, which is a misapplication of the law of the excluded middle. That is, the alternative to “evolution” is “not evolution” — a large and unknown range of possibilities. To say that the only alternative is “creationism” is to impose a false condition, and reflects a lack of formal rigor and imagination.
.6. Your comments about “science” seems almost religious in tone. Science is a useful social process, one of the most powerful creations of western society. It is possible that future generations will develop a social and analytical process far better, and regard our efforts to understand the universe as childish fumbling in the dark.

Absent from most of these conversations is talk about old mother nature herself. While looking over a plate tectonic map, I noticed that the fault line separating the African plate from the European plate runs right straight through the Strait of Hormuz. In tectonic terms, it wouldn’t take much for mother nature to heave up the sea floor and turn the Persian gulf into a lake. Note also, that Iran has been seismically active for the last 20 years or so. Hardly a year passes when they don’t have a killer quake somewhere.
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.Fabius Maximus replies: Although I am not a geologist, the history of large-scale geophysical events has always fascinated me. A wonderful book about this is “Catastrophes in Earth History”, Steven A. Austin (1984). We are bugs crawling on the Earth’s surface, helpless and tiny before its power. Fortunately, the Earth is almost always a quiet and benign home for us.

I am not an oil expert and consider the subject of peak oil very difficult to understand. Mainly because so many different things play together.

If we used the same technology in 2008 like in 1970 we could already have experienced peak oil. If we on the other hand could develop even better energy-saving technology than we have today we could delay peak oil almost infinitely.

In theory. I am not really an optimist – at least not in the short term – because we are blindfolded into believing that economic growth is of paramount importance and that it has to happen regardless whether it causes climate change or if the energy resources for sustainable economic growth might not be there in the future. Even today you have to look far to find a economist who will ask questions like whether economic growth is sustainable with scarce energy resources or even desirable if it makes our planet warmer. They also don’t consider the question if oil scarcity would make oil producing nations to sell less oil to the world market and keep what they got for themselves.

In short: Economists need to ask some hard questions regarding how they view the world. The basic premises might soon change.
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.Fabius Maximus replies: Much of this is a question of time scales. A difficult 20 year adaptation might rate only a footnote in the history books of 2300 (e.g., at Star Fleet Academy). On the other hand, saying that “of course we will adapt” (as many economists do) is a worse than useless insight for us today. As John Maynard Keynes wrote in 1923:

“In the long run we are all dead. Economists set themselves too easy, too useless a task if, in tempestous seasons, they can only tell us that wen the storm is long past the ocean is flat again.”

Failure to prepare for peak oil might mean ten or even twenty years of slow growth, or worse. A horrible fate for us and our children, however trivial it looks a few centuries from now. The necessary technology will not necessarily appear just because we need it. The “invisible hand” helps those who help themselves.

“Both the “Earth moves around the sun” and “Earth is round” have physical verification, esp. since we have traveled into space.”

As a side note, if one has the need to use the axiom that the Earth does not revolve around the sun (e.g. when teaching a seminar on Feyerabend) one can dig up Aristotle’s arguments and invite the students to try to collect data to refute it. Almost certainly they will fail, because one must be very, very good with astronomy to even try to refute Aristotle’s argument on this topic.

Further, if one is not entirely science-illiterate, one will be conversant with Quine, Duhem, and Kuhn. Ergo, one will know how to hedge when one makes statements about the nature of scientific proof, and one will not make undergraduate-level errors like those of João Carlos.

Side note to João Carlos: Please, please, send out your papers on philosophy of science for peer review. If I get lucky, I’ll be the one to write to you explaining what needs to be revised.
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.Fabius Maximus replies: I do not know if this is true, but I read that NASA used Ptolemaic models to calculate planetary paths. There were computationally simplier than Newton’s equations, which are practically unsolvable for large numbers of bodies.
.Carlos, I second judanoose’s suggestion. He seems to know quite a bit about philosophy of science (I have read a bit of Popper and Kuhn, a long time ago).

Within the last week, a blog-post or article proposed a different view of peak oil. I cant find it now, but perhaps it was right here on Fabius site (?) The gist of this view was that the peak, or “tipping point”, was not geo-physical and technical (therefore subject to empirical confirmation) but psychological or market-related. In other words, once oil consumers and brokers begin to *feel* we are at the point where resources fall below demand, the price of oil begins to rise, and the damage begins to occur whether we are physically at *peak* or not.
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.Fabius Maximus replies: Two points. First, prices increase when current demand exceeds supply — no belief is needed.
.You might mean that prices increase as consensus estimates of remaining recoverable oil are marked down. Agreed! That is basic economic theory.
.In “The most dangerous form of Peak Oil” I describe Political Peaking, in which estimates of future production are reduced as Middle East nations announce their unwillingness to pump more than they need (that is, the amount needed to sell sufficient to pay their bills).

This is along the lines of what I described as the ‘peak export oil’, quite rightly various commentators have added other factors to my original point (which was that rising domestic demand reduced the capacity to export of many oil producers). Correctly, economic, political and environmental factors also affect the capacity to export, even though production can stay the same or even increase.

A bit of caution though, Saudia Arabia may just be putting a brave face on reality. There has long been speculation that several of their giant fields were at, or very near, their peak and that attempts to keep production up were causing geological damage that will reduce their ultimate recoverable oil. A bit of ‘spin’ perhaps?

The trouble is no one really knows for sure, the secrecy in the oil countries and companies is legendary. No one knows what the real state of the Saudi fields are. This is counter productive of course, as it impedes long term planning and encourages the ‘yes we will have $30 a barrel oil again” optimists, while crowding out the hard realistic science that needs to be listened to, so we can get ourselves out of this mess and still maintain some sort of reasonable standard of living without devastating the rest of planet.

Peak oil (and natural gas) has to be defined a bit more. Firstly peak oil (as in production) and peak export oil has already hit a lot of the world. The US, North Sea (UK & Norway), Indonesia, Australia, Malaysia, (even Vietnam), Mexico, etc, etc, have all hit either of those peaks (in the 70’s in the case of the US). World production relentlessly moves back to the ME.

Many of these projects came on stream in the 80’s, after huge investments in non-ME oil production (largely a reaction to the oil embargoes of the 70’s), giving us nearly 20 years of $US30 a barrel of oil .. which we completely squandered, instead of using it as time to get our energy efficiency/alternative production up and running. A little chart in the New Scientist a few weeks ago demonstrated this clearly. showing energy R&D in the US, after peaking in the early 80’s then collapsed and is only now rising again, (this is in actual $, not even inflation adjusted ones).

Now this is not the whole world picture, France expanded its nuclear power, built fast train networks, subway systems, etc. Unfortunately very few countries did this. The, for example, UK squandered its oil and gas into tax cuts, consumption and gas fired power stations (my god, might as well just throw away 65% of the gas), while not investing in its transport and other energy infrastructure (watching the UK nuclear industry collapse, after leading the world, was like watching someone eat all the food in their house, spend all their money on lottery tickets and then wonder why they have no food now).

Note that many of these newer oil projects show a disturbing pattern, using the latest technology they tended to rise in production very quickly, peak, then drop like a stone. This tends to contradict some who argue that new extraction technology will somehow stave off the peaks, in reality they appear simply to shorten the pattern, rather than change the ultimate volume by anything significant.

A last word to the wise … adaption time. Yes (say) Australia could cut our oil use considerably, but it takes time and investment. Turning over a whole country’s vehicle fleet (to more efficient ones) could take decades. Replacing and decommissioning gas power stations ditto, building fast train networks, ditto again, upgrading and expanding metropolitan public transport, ditto again, switching goods shipping by trucks to trains, also ditto, … etc, etc. These are all decades long programs that require tremendous amounts of capital (where will it come from, who will lend us it?), technical expertise (the way technical education has collapsed it will be pensioners doing it) and resources, including, initially, huge amounts of energy, especially oil and gas (which is already short and expensive).

Have we all gone so far over the precipice in some places (e.g. US, UK and Australia) that there is now no way back?
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.Fabius Maximus replies: The best (almost the only) recent public analysis of Saudi Arabia’s reserves is Matthew Simmon’s “Twilight in the Desert”, in which he builds an interesting but inconclusive case that the Saudi reserves are not as great as we believe.
.For more information on the issues Oldskeptic raises, see …
.1. Links to articles and presentations of some A-team energy experts — esp follow the link to read the Hirsch et al “Mitigations” report, which is the best work to date on the challenge of adapting to Peak Oil. If everyone who talks about this would first read the report, we would be far better off.

On the Saudi reserves, there is another troubling option. They don’t know either, which case it doesn’t matter how good the intelligence is (not that I have any confidence in that)!

Oh, sure, there may be low level geologists and engineers that may have a good idea, or even hard evidence, but they’re being ignored or told to shut up and the higher levels are being deliberately ignorant, or living in that cosy bed of warm and fuzzy optimism. Everywhere is prone to ‘telling the bosses what they want to hear’ rather than the truth, its not just a Western phenomenon.
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.Fabius Maximus replies: Possible, but this ignorance is not consistent with good resevoir management. And all sources agree their the Saudi’s management is among the best in the world. I am confident that they do know. I strongly recommend reading “When will global oil production peak? Here is the answer!”. Does the CIA know?

If they did (and that is a big if) and they passed on advice (say 5-10 years ago) and they were listened to (another big if) then the other option to investment, energy conservation, alternatives, et al, was to take over an oil producing country. Somewhere easy to take over, with large reserves, somewhere that was close to many other countries oil and gas fields, in fact somewhere remarkably like … Iraq.

I note the almost universal support from the big end of town and Congress (with some honourable exceptions), which, with the odd dissenting or mildly critical note now and then, really has not waivered in that support.

Note also, the noises coming out now about using Iraqi oil money to pay for ‘reconstruction’ and ‘their security’. What, stealing 10 billion in the ‘oil for food’ coffers was not enough?

Perspectives are important, from ours and many others (especially the Iraqis) it has been an unmitigated disaster. But, put yourself in another mindset (warning: this may require taking many strange drugs with some very odd side affects, you could grow another head or turn green). Let us enter, with great trepidation, the neo-con Twilight Zone (do not adjust your horizontal):

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The opposition to the US Occupancy has tailed off. Divide and conquer has worked amongst the Sunnis (ok that meant probably having to back AQ at times – as we did in Lebanon but what the heck). Losses in US soldiers, who are mostly lower class, are acceptable (in their terms, what’s the problem of a third of fourth tour, hey it’s tough our there on the golf courses these days). Divide and conquer is now being tried against the Shiites. Another Fallujah against Basra is not unacceptable, actually preferable as it secures the supply lines (thanks Bill Lind for that, we sort of missed that problem). The several million Iraqi refugees means strain on Syria (good) and less opposition and less domestic consumption of oil.

All in all a good days work against the prospect of trillions and trillions of dollars of oil. And look at all those Iranian oil and gas fields so close to the Iraqi border. A quick decapitation by our Air Force and Navy, a few troops to enter those areas and secure them, easy, plus it kills all those annoying gas deals with China.

And as for military strain, what strain? The pentagon is still putting in larger budgets and getting them, heck Congress falls over itself to give them more money than they ask for. They’re getting their F-22’s, F-35’s, new subs, new aircraft carriers, Strikers, Full Spectrum Dominance, new nukes, war in space, etc, etc, sadly more etc. So what do they care? And all those golf courses the military own? These are essential national security assets and only a damn commie would question their worth.

On a hysterical note (in the cynical, black humorous sort of way), a writer in the Australian newspaper, an expert (?)in foreign affairs no less, (don’t bother looking it up as you all have better things to do than read this stuff, like taking the rubbish out), actually did a big piece on how the Iraqi occupancy has RAISED respect of the US (and sort of Australia) in Asia “AND that is why we must stay the course, to maintain that respect” (paraphrase).

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Coming back to reality, a difficult thing I know, after a trip through the Bizarro universe, pause for a few moments to regain yourselves, take a deep breath and touch something real to re-ground your mind.

Now we know the difference, because we are like the termite inspectors. We see that the whole edifice is based on floors and walls that are about to collapse, with the roof coming down for good measure. Trouble is we go to the owners and say, you have a major termite problem and you are going to have to pay a lot of money to fix it and you must do it soon. And they say, “What! It looks fine to me, look at the new car, all the new furniture, the latest model DVD player and I have that new Plasma screen to get today. Go away you fool”. And they head up the road to buy a new 50″ screen (muttering about commies or islamofacists that need to be locked up) and put it on their credit card (which was maxed out until they increased the limit on it last week).

As usual, history (or in this case the news in the near future) will show who is right.

The UK and France (along with Israel) invaded Egypt in the Suez crisis. Both still broke from WW2, both countries involved in affairs elsewhere. Now no one in their right mind would have thought they would have done it. But do it they did, only the prospect of total bankruptcy by US pressure pulled them out. Bit like a stock market boom, ‘irrational excuberancy’ can last far longer than everyone thinks (Keynes famously said until long past they ran out of money).

Or maybe in this case, until all those weird drugs they are taking run out. Anyone notice any strange bulges on their shoulders?

Science considers degrees of evidence: weakly suggestive, suggestive,
strongly suggestive. Only those theories with the faintest evidence
can be called `just another opinion’. Often, that evidence consists
only of anecdotes. There are no absolutes, although people prefer
them.

In addition, evolution requires that you abandon purpose in nature,
imagine time as linear, think of single and multiple sets of
characteristics, and think of chance.

Regarding the end of teleology: we have purpose. When we move
stones, we have a goal. When a tree puts out leaves, it has a goal,
that of collecting sunlight and producing chemicals. False reasoning
extended that notion to every process. That meant there had to be a
reason that animals proliferated, that circumstances changed, and that
many died before reproducing. Often you can extend your reasoning;
but this was a case where that extension was wrong.

You must imagine time as linear. In the old days, people extended
their knowledge of days, menstrual cycles, and full moons into time
generally. They saw that winters or seasons of rain repeated every
year. Their next, and false, step was to imagine everything as
recurrent. Only some things are.

Imagine bags of coffee coming into port on sailing ships. The
merchant who dealt in the coffee trade was either himself an
accountant or hired one. He would see that income depended only
partially on cycles. He would see for years ahead a linear trend in
the desire for and the ability to pay for cups of coffee.

By Darwin’s time in Britain, a good many grew up in families that
thought of time as linear. For those people, it involved very early
learning. They believed it deeply. I think perhaps as many as a
tenth or a fifth of the population thought it.

`Essentialism’ is the notion is that every fundamental element can be
specified by a single set of characteristics. The number two is not
the number three; a triangle is not a square, a cat is not a dog.
Among humans,an accidental killing is not the same as an intentional
killing, although the victim is just as dead.

You cannot turn a cat into a dog, but at the same time, you cannot
claim that it is impossible over vast stretches of time for the
descendants of an early mammal to turn into cats and dogs.

As for single and multiple sets of characteristics: all mass four
helium atoms are identical, except for location and energy. So are
all equilateral triangles, but no people are.

The only way to think about people is to think about populations.
Populations have members who are different from each other. Of
course, we relate to individual persons. It screws everything up if
you think of an individual as a population.

For evolution, you have to think of populations, of chance or
probability, of the more successful reproducing and keeping the
characteristics that succeeded.

Given the partially adequate evidence of his time, as well as his
shyness, Darwin never did claim his theory enjoyed enough evidence to
be called a law. Darwin confused people when he spoke of one theory.
This was a mistake. Really, he was advocating five, as Mayr says,
each with a different degree of supporting and opposing evidence.

When Darwin wrote, natural selection — reproduction of the more
successful and maintenance of their blueprints — was mathematically
convincing. There was a fair amount of observational support, too,
although no one knew the difference between intra-generational or
Lamarckian change and extra-generational, i.e. genome or blueprint
based, Darwinian change. Darwin himself may have been Lamarckian.

Given natural selection and a linear notion of time, you expect
evolution as such. Having stopped thinking that essentialism applies
everywhere, natural selection implies a multiplication of species
Darwin’s other two notions, gradualism and common descent, were not so
obvious, although weirdly enough, according to Mayr, evolutionists of
the time held to them more readily than to natural selection. They
were very confused. Maybe Darwin was smart to present his five
notions all together as one.

In addition, just as a baker was an `entity who bakes’ and a shoemaker
was an `entity who makes shoes,’ a `designer’ was an `entity who
designs’. The mental model of `entity’ fooled most people. It did
not occur to them that the relevant `entity’ might be a non-sentient
process that reduced the fertility of portions of a varigated
population that would otherwise multiply. Even though they knew that
the relevant duration was vastly long, people did not think that
workable solutions would occur in nature, like human eyes, which have
their connections in front of rather behind the receptors.